Jason Allaire, captain of the Rhode Island Sheriff’s Division, is sounding the alarm about a highly scrutinized retirement plan administered by TIAA Financial Services after discovering that the 401(a) plan, which had been sold to him and his colleagues as nearly identical to a 401(k) plan, came with some caveats.
Allaire has saved thousands of dollars in the state retirement plan, which was overhauled after Rhode Island’s severely underfunded public pension plans went into crisis, with enough funding for less than half of the combined pension liabilities, according to a CNBC report (1).
A 401(a) is the equivalent of a 401(k) for government workers, so when Allaire decided to withdraw some money from her fund to help her daughter with college tuition, she assumed she would simply have to pay the penalty and taxes like with a 401(k).
However, he discovered that he would not be allowed access to his money until he stopped working for the state.
“We can’t touch it, borrow against it or move it,” even in an emergency, he said in an interview with NBC News (2).
“This plan is practically holding us hostage.”
Starting in 2023, Rhode Island’s 401(a) accounts transitioned from management by low-cost provider Vanguard to TIAA, which CNBC says makes big profits from managing the plan.
While Rhode Island officials defend their decision to change management of the plan, it turns out that the decision was quick and quiet: It was made during a single meeting of the Rhode Island Investment Committee in May 2023, CNBC reports, and no details of the deliberations appear in state records.
Allaire’s experience may be common and not limited just to those with public retirement plans administered by TIAA. CNBC cited critics who say Americans with retirement plans may be victims of predatory practices, including selling risky financial products, accepting plans with complex rules and hidden costs, and undisclosed conflicts of interest.
“Our system depends on Americans’ ability to invest well for their retirement,” Barbara Roper, an investor protection expert and former chief counsel at the Securities and Exchange Commission (SEC), told the news outlet.
“But most Americans are not good at investing: They pay too much for substandard products recommended by conflicted representatives.”
TIAA is currently under investigation by regulators in three states — Montana, Vermont and Washington — who are investigating allegations that it steers retirement savers toward expensive TIAA products, including one from the RI Plan, according to a former consultant turned whistleblower.
Speaking to NBC News last year, Ted Siedle, an attorney for the former TIAA consultant who filed the SEC complaint in 2024, said, “This is a company that has been plagued by disturbing whistleblower allegations for more than a decade” (3).
“These state regulators have serious concerns about the integrity of the advice TIAA provides and its representative sales and licensing practices.”
Responding to NBC News about the investigations, TIAA spokesperson Michael Tetuan said at the time, “We cooperate fully and transparently with all regulatory authorities.”
And regarding Rhode Island’s retirement plan, in a statement to the news outlet Tetuan said, “Rhode Island makes all legally required disclosures available to participants,” adding, “Ultimately, it is up to participants to decide which specific investments best fit their financial goals.”
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A 401(a) plan is intended to be similar to the 401(k) you’re probably familiar with, but there are some important differences.
First, 401(a) plans are available to those who work in government agencies, educational institutions, and nonprofit organizations. 401(a) plans typically have more modest growth compared to plans with broader investment options, as government employers tend to limit investment options to only the safest, lowest-risk options. This type of plan gives employers more control over their employees’ investment options.
As with a 401(k), an employee can (under normal circumstances) roll over his or her 401(a) funds to a 401(k) plan or individual retirement account (IRA) if he or she leaves his or her employer. The employer also controls the 401(a) plan and determines employee contribution limits.
It is important for the government or other public employees to seek out as much information as possible about your 401(a) retirement plans, especially if the fund switches to another provider.
Read the fine print or have a financial advisor or attorney specializing in this area review the contract. You may be able to join with your colleagues to cover the cost of legal advice. If these professionals find gaps in the information you have been provided, you will have a strong case to demand full access to the information you deserve.
There are also retirement investments alternatives to the 401(a), including a Roth IRA or a traditional IRA. However, the IRA contribution limit is considerably lower than that of a 401(k) or 401(a).
You can supplement your IRAs with certificates of deposit (CDs) while interest rates are high, or invest in annuities or permanent life insurance policies. Finally, investments like mutual funds, stocks, bonds, or real estate can help grow your retirement fund so you don’t have to rely as much on your employer’s 401(a).
Unfortunately, there’s not much Allaire and his colleagues can do about their retirement plan. Talking to both your employer and the media if you believe your 401(a) is being mismanaged may be a necessary step to help ensure that your rights as a worker are taken seriously. You may also choose to consult with an attorney individually or with your colleagues to determine if you have a case to sue for changes to your plan.
In many cases, the only option to gain more control over your retirement may be to change jobs and therefore transfer at least a portion of your 401(a) balance to IRAs or your new employer’s plan. Make sure you clearly understand your 401(a) contract and its rules before taking this step, to ensure you don’t lose any of your savings as a result. In many cases, you can withdraw from your plan as a lump sum and reinvest it in yourself, or roll it over to another retirement plan at your new employer.
The key thing is to know your investment contracts inside and out. Robert Jalette, a colleague of Allaire in the Sheriff’s Division, was also prohibited from accessing his funds.
“I don’t think any of us knew it was going to be closed,” he said.
Allaire, meanwhile, continues to fight for better treatment.
“This whole situation from the beginning,” he said, “was a disaster.”
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CNBC (1); NBC News (2); NBC News (3);
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
